July 22 (SeeNews) - Standard & Poor's said it has raised its outlook on Zagrebacka Banka [ZSE:ZABA], part of Italy's UniCredit Group, from negative to stable, and affirmed its long-term issuer credit rating at 'BBB-'.
The upgrade followed by a recent outlook revision on UniCredit Group (UCG) and Croatia, S&P said in a statement last week.
S&P expects ZABA to continue its operations as an important guide for the group's retail and corporate activities in Croatia and Bosnia.
"Given Zaba's strategic importance to the group, we could rate the bank three notches above its stand-alone credit profile (SACP) and up to one notch below the rating on its parent company. We currently rate the parent UCG 'BBB/Stable/A-2'; we therefore cap our long-term rating on Zaba one notch below the rating on its parent company", the rating agency said.
Standard & Poor's noted that ZABA benefits from a good level of capitalisation, which is reflected in its risk-adjusted capital ratio which was above 9% at the end of 2018.
"We anticipate that this ratio will remain in the range of 8%-9% in 2019-2021, on the back of the bank's continued focus on working out its stock of nonperforming exposures, about 13% cumulative growth in the bank's customer loans portfolio, and 100% pay-out ratio", it added.
The agency said it expects high reliance on customer deposits, as it thinks ZABA will remain a strategically important subsidiary within UCG over the following 12 - 24 months.
"A weakening of Zaba's SACP would not affect the rating because of the availability of group support. We continue to view the cap on the bank's long-term rating at the sovereign rating level (BBB-/Stable/A-3) as applicable. This is because we think Zaba might not receive timely and sufficient support to withstand a hypothetical default of Croatia," S&P noted.
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